The business models of OEMs and tier one suppliers - the customers for ESPs - are rapidly changing as they deal with the opportunities and challenges posed by e-mobility, digitalisation, increased connectivity, and autonomous driving.
A particular feature of these global megatrends is that they are leading to increasingly complex project assignments and a focus on integrated vehicle competence, a trend which only further drives the need to form new partnerships.
In order to accelerate their design and engineering capabilities in the automotive growth areas, OEMs and tier one suppliers, as well as ESPs, are turning to M&A to acquire the relevant know-how.
A measure of the significant interest in the ESP sector is that it is seeing above average multiples compared to other areas of the automotive industry. For instance, listed comparable companies generally trade between 6-8x EBITDA, depending on the type of services offered. The more software-based the product offering is, the higher the multiples too.
Recent trade deals
- ZF Friedrichshafen, a German manufacturer of automotive components, acquired a 35% stake in German engineering services provider ASAP Holding. ASAP has extensive expertise in the areas of autonomous driving, e-mobility, connected cars and vehicle software
- Altran, a leader in engineering and R&D services, acquired Benteler Engineering, a German specialist in design and engineering services for the automotive industry
- Honda, the Japanese automaker, acquired a €665m stake in Cruise Holdings, the self-driving unit of General Motors (GM) which the US OEM acquired in 2016. The two companies will now collaborate on a purpose-built autonomous vehicle and Honda has
also committed a further €1.75bn to the project over the next 12 years. GM is aiming to develop a vehicle, based on its electric Chevrolet Bolt, with no steering wheel or pedals that can be used in driverless taxi and delivery services
- French technology consulting and engineering company AKKA Technologies acquired a controlling interest in MBtech Group, a German engineering and consulting services provider to the automotive, rail, and aerospace industries. The deal creates one of Europe’s largest engineering consultancies. AKKA has its main focus in France, Italy, Spain and the UK, while MBtech has a strong market position in Germany, China and the US
- Beijing BDStar Navigation, the listed China-based specialist in satellite navigation positioning equipment, acquired a majority stake in in-tech, a German company which develops and tests automotive electronics systems
- Minda Industries, an Indian automotive company, acquired an 80% stake in iSYS RTS, a German hardware and software developer for OEMs. The deal helps Minda expand its electronic control units’ offerings and technology solutions
- Dana Incorporated, a US designer and manufacturer of cars, automotive components and technologies, acquired a majority stake in TM4, a Canadian designer and manufacturer of motors, power inverters, and control systems for electric vehicles. TM4 is a subsidiary of Canada’s largest electricity producer, Hydro-Quebec
- FEV Group, a German powertrain and vehicle engineering company, acquired B&W Fahrzeugentwicklung, a German vehicle development company which also provides
professional engineering services. FEV’s expertise ranges from consulting to the development and testing of innovative vehicle concepts, and it is investing heavily in the development of hybrid and electric powertrains, as well as in alternative fuels
Recent private equity deals
- 3i acquired Formel D, a global service provider to the automotive and component supply industry. As part of the deal CITIC Capital also invested in the company in a move which helps Formel D further build its presence in Asia. In another deal involving the private equity group, 3i also sold German drivetrain testing company Atesteo to industrial holding company IHO Holding
- Abris Capital Partners, a Polish private equity firm, took a majority stake in CADM Automotive, a fast-growing design office specialising in the development of individual components as well as entire modules and systems for the automotive sector. CADM was founded in 2012 and has clients across Europe, the US, China and Japan including leading automotive brands such as Bentley, Porsche, Jaguar, VW and BMW
- The Saudi Arabian sovereign investment fund Public Investment Fund acquired Lucid Motors, a US manufacturer of battery chargers and battery-monitoring software for the automotive and aerospace sectors. The deal provides Lucid with the necessary funding to commercially launch its first electric vehicle, the Lucid Air, in 2020. Lucid will use the funding to complete engineering development and testing of the Lucid Air, build a factory in Arizona, and begin the global rollout of its retail strategy
- Meti Holding acquired a 35% stake in TM Performance, an Italian provider of components and services to the motor sports industry. TM offers production, engineering, and problem-solving services for major brand names across the industry such as Automobili Lamborghini, Dallara, JAS Motorsport, Abarth (FCA Group), and AUDI Sport Italia